In this article, we discuss the 5 best dividend stocks to buy according to Cliff Asness’ AQR Capital Management. If you want to read our detailed analysis of the hedge fund and its recent development, go directly to read 10 Best Dividend Stocks to Buy According to Cliff Asness’ AQR Capital Management.
5. The Allstate Corporation (NYSE:ALL)
Number of Hedge Fund Holders: 27
Dividend Yield as of January 17: 2.61%
An American insurance company, The Allstate Corporation (NYSE:ALL) has an 11-year track record of consistent dividend growth. Currently, the company pays a quarterly dividend of $0.80 per share, with a dividend yield of 2.61%, compared with the insurance industry’s average yield of 1.51%. Due to the company’s strong business fundamentals, the analysts expect a 7.5% annual dividend growth rate for the stock in the coming years.
AQR Capital Management made its first investment in The Allstate Corporation (NYSE:ALL) during the fourth quarter of 2010, worth $4 million. In Q3 2021, the hedge fund owned roughly 3 million shares in the company, valued at over $377 million. The Allstate Corporation (NYSE:ALL) constituted 0.69% of Cliff Asness’ portfolio in Q3. Recently, JPMorgan set a $140 price target on The Allstate Corporation (NYSE:ALL), with an Outperform rating on the shares.
Of the 867 elite funds tracked by Insider Monkey, 27 hedge funds held positions in The Allstate Corporation (NYSE:ALL) in Q3, down from 33 in the preceding quarter. The total value of these stakes is over $821.1 million.
Appleseed Fund mentioned The Allstate Corporation (NYSE:ALL) in its Q2 2021 investor letter. Here is what the firm has to say:
“Allstate is the second-largest personal insurance company in the United States with a 9.3% share in auto insurance (4th largest) and an 8.0% share in homeowner’s insurance (2nd largest). The company sells products primarily through its captive agents though this business line is shrinking as the company’s direct (Esurance.com and, more recently, Allstate.com) and independent agent businesses grow more quickly. The personal insurance industry is relatively consolidated, and competition has historically been rational, allowing Allstate to earn attractive mid-teen returns on equity in this business over the past decade. Allstate also recently announced plans to divest their low-growth, low-return life and annuity businesses. This will free up capital to reinvest into the more attractive personal insurance segment and result in improvements on consolidated returns on equity of approximately 2.5%.
Despite the attractive industry dynamics of the personal insurance business and the steps that Allstate has taken to dispose of lower return businesses, the company’s stock currently trades as if Allstate will never be able to grow its earnings. At our purchase price, Allstate’s stock was trading for less than 10.0x forward earnings estimates. While Allstate does face tough competition in the auto insurance business from GEICO and Progressive, their market position, strong brand, and increased investment into the direct insurance business should allow them to grow earnings. Overall, we believe this entry price is attractive for an industry leader in a high-return, consolidating industry. Further, downside risk management should be positively impacted by the dividend yield, a strong balance sheet, and a management team that has historically increased share repurchases when they view the stock to be trading below its intrinsic value.”
